The true lies of profitable losses

When you are so content with yourself, that you just hired a bunch of programmers in India or Pakistan at the rate of about 50 pence an hour, and they  think its great!

Having an ethnic background from the Indo-Pak region, i thought to myself that i’d jump local ship early and hop across the continents over to Pakistan and source some talented programmers.

So in the latter part of 2002, this is exactly what i did. I read an article in Computer Weekly about how the government in Pakistan was facilitating outside investors greatly, and that there was a huge investment and great focus in this area.

The good
Everyone was desperate to work, so finding programmers was easy. Finding office space wasnt overly difficult either. I had a small team setup within approximately 7 days. We got along well, spoke the same native language, and there was plenty of enthusiasm taking to the office air.

I came back to the UK, wrote some specifications for a few internal projects and luckily was handed two projects by new clients. My combined expenditure for a team of 3 with an office was approx £600/month.
The equivalent of this in the UK would cost me approximately, £4500. So i was in effect, saving a colossal £3900 a month.

This meant i could afford to quote lower prices to customers, while still maintaining good profit margins and hopefully had enough resources to work on internal projects.

Well that was all the good news, and that really is it in this saga, because what i learned in the months that followed was its not just about the short term math.

The bad
I’m not a software developer myself, though i am familiar with basic software development principles and i am aware of the different platforms, languages and development environments. I wouldnt be lost at a developers conference, but i’d probably get pretty bored, pretty quick.

This lack of development knowledge, meant i was not able to assess development time for projects and had to rely on estimates back from my developers.

That made me a little too co-dependent.

And let that be a lesson to us all in management positions in IT. Never let your staff ‘blag’ you. Know you’re game. It will only come back you and bite you in the derriere later!

Anyhow.  There were also problems, such as the fact that Pakistan’s internet access is controlled through a central proxy server which monitors outbound activity. Some standard secure ports were blocked, which took me more than 50% of my working time to realise and then took even more time, to track the right people in getting these ports opened so my guys could do the work upload the code to the lab and production servers that i had setup here in the UK.

Holidays in Pakistan were aplenty which meant the team were taking off at least 2 working days a month with the excuse that it was a public holiday. There was plenty of “load shedding” problems. (These are power cuts that take place throughout the day to deal with power overload) . Pakistan , is after all a developing country.

It was difficult to keep a general eye on the staff from day to day, as the project manager, (myself) was in the UK, and not with them in the office.

The test servers were also in the UK, as there was no technical staff available to maintain development servers locally in Pakistan. (no one had quite the skill set), which had its obvious effect on testing.

I had to learn to deal with these issues, and both of the external projects were late as a result, which didnt fair to well with my clients. Luckily, i did have a very good relationship with them from prior projects and that gave me some leverage some what. Either way, i didnt like to be put (even if its by my own doing) in such a situation, and certainly it could have been better. I was not expecting a gamble.

The ugly
Fortunately, i did manage to deploy the two projects in the end, and not too  late, and the client relationship remained unaffacted, luckily. *wipes forehead*.

But what i experienced in between, and what i learned was actually not too pleasant.

It was very difficult to set boundaries with the staff, as they constantly felt the need to further personalise the working relationship. Not only did this make me uncomfortable as it was completely unnecessary, but its not good for the working environment.  It seems to be standard working culture abroad. I dont think it would work well in the UK for sure!

We had a number of problems with both systems after delivery, and after i had closed operations down in Pakistan. I wasnt frightened of challenges, i came to the conclusion that the ‘time wasnt right’. We didnt lose money on the contracts, but nor did we make as much as we were supposed to.

I had to hire developers locally to fix the problems in the School Booking System, and the Removals software system.

The developer that i handed the project too, said that the coding was extremely poor. I realised quite quickly that these problems would not have presented themselves had i not outsourced the project offshore.

We recently re-wrote the Resource Booking System, and managed to put it together in 25% of the time using .Net as the first version was done in PHP. We like .Net because its more scalable, and also working with Microsoft SQL server offers us many small advantages, which is a combination are very attractive.

What i learned
I think the lessons learned and the conclusions i formed could have gone one of two distinct ways depending on the mindset.

I didnt profit from my venture, and it left a bit of a bad taste in my  mouth, but i didnt make a loss either.

Some time after closed down the Pakistan operation, i met someone locally who had come from India and was working as part of a large team at HSBC, developing in Java. He told me he had come over for 6 weeks for training, to get to know the business, and to learn new ways of working as well as to improve his skill set.

In recent times, i’ve also seen Microsoft do a reasonably decent job of their outsourced call centres, and as much as i hate Indian Call centres, (i dont hate indians, i dont like the fact they cant understand what i am saying, or understand my problem), 3G seem to have done a pretty good job in making their setup reasonably transparent.

I think it comes down to the fact that, with a proper infrastructure in place, where good project management is present not only locally but also overseas, and where there is a greater emphasis in making sure the developers truly understand the business context, outsourcing operations can really pay off.

I think the larger companies can profit from these ventures, because they reap the financial rewards over time. Initially the investement in training, infrastrcuture and so on, can actually be quite costly.

For me personally, and for us at XS-PRO, i think we have learned our lessons, and are not deterred but at some point will look once again abroad, but this time building upon our experience and taking up on informed judgements.

The lack of understanding with regards to business context is just one part of the problem with developers abroad, the other part is helping them to understand how their work fits into the grander scheme of things.

All in all, it can and does work.

Did i scare ya?  

The not so changing face of outsourcing

Some while ago i needed to brush up my skill set with regards to security on the Windows desktop and server operating systems, so i referred to Roger Grimes book on Windows Desktop and Server hardening .
What is interesting about his book, is that unlike most authors, as part of the introduction he doesn’t dive straight into the technology that he will be talking about, or how one will become a complete wizard in 4 easy steps in the [insert any up and coming technology name here] arena.

Roger actually makes the conscientious decision in commenting on the blind following in society. You see, as Roger explains it, and i paraphrase…. is that viruses and security threats have been around from the early days and the advent of the internet was not the beginning of the rise in malicious activities from our virus writing friends (ok, they’re not our friends, but i wish they were, cos that would make my life easier).Malicious threats have been around in the form of viruses transferred via floppy discs, CD-Roms and other media used in bygone days and were present in MS-DOS and not just windows. Linux has its fair share of viruses too. Don’t think  that it doesn’t.

Journalists, copywriters and those generally associated with IT related press have a grave habit of extenuating (replace with exaggerating, or over-hyping) realities and truths. I guess someone has to put food on the table, and by the same token, i guess we have to wonder “How else will they sell the papers or generate internet traffic if their stories are not newsworthy?”Unfortunately, other than

Celebrity culture, media hype toys with IT more than any other part of modern day life. Every new piece of technology is suddenly the saviour of business, the best thing since sliced bread or the future of the modern day as we know it.

The next best thing
Back when i was at University, we had been learning about Application Service Providers. This was the “way of the future”. When i met Waqas in the early days of XS-PRO and mentioned this term, he gave me the look of disarray, which at the time, i found quite baffling. He had just left his senior post at HP/Compaq, and i was surprised to learn this term was not part of his every day vocabulary, since most people i had met through my business associations were not in the same position.  Come to think of it…There were many buzzwords that were still floating around in the post-2000 era that i rarely hear of today. Remember, e-business integration? or business to business hubs? What about de-centralised e-procurement?The fact of the matter is, the larger corporations carefully assess true business benefits and real market value when looking at emerging technologies or business models centred on technology. Try a search for HP and Application Service Provider in Google, you won’t find many relevant results. That’s probably because they don’t care. Now i know HP is not really in the software game, but this is still going to prove my point.It is unfortunate that the smaller businesses jump on the new technological bandwagons much too quickly. Ploughing no end of their scarce resources into something that is likely not to bear any fruit, but the vision is so clear, you can almost taste it (pun intended).There was much talk about how applications were going to run solely on the internet, that we would no longer need Microsoft Windows on PC as we know them today, but we would be using dumb terminals in just a few years time. Over time, as the developments unfolded, naturally, it became apparent that web technologies, in their then incarnation were not up to their required task. Creating true web/internet only software experiences was not a small project due to the limitations of technology. It required formidable size teams, appropriate planning and upscale hardware to truly deliver, and even so, the experience was and could be quite primitive.This was only the first part of the problem.

The actual problem
 

The actual term Application Service Provider [ASP] was actually heavily mis-understood. An ASP is not a piece of software that runs on the internet (alone). eBay has an interactive website, like many other high traffic websites, but just because, their internet website (software) manages its end users (customers) that does not make it an ASP.The same goes for our new Pay As You Go system.

Customers submit support requests using our online web application, but again, that does not make the PAYG service an ASP platform. This general misconception created many problems. Everyone was jumping on the ASP bandwagon without understanding truly what it was.

The ASP hype finally started to dwindle around 2003, and just recently interest in this area has re-emerged albeit with two new distinctions. We now have Application Service Providers, and companies that provide Software as a Service [Saas] 

As I see it, evolutions in technology and business models generally tend to go one of two ways.

a)     The industry either realises, that although XYZ technology is great, the market is not quite ready yet and we see a re-emergence in a new light or as a more refined idea, as with the above example of ASPs

b)     Or, there are a hundreds if not thousands of SMEs that adopt the new ways of doing business through the changing face of technology until the bigger players get serious.

Business clusters
Here in Yorkshire, in the early 90’s there were a number of retail computer shops that emerged offering PC components, peripherals, repairs  and upgrades. Some of them were also serving businesses too. As the internet became more popular we had the emergence of local ISPs, and now since 2002 onwards we have a plethora of IT support and service providers.

They attracted clients on common themes.

The fact that they were local and easily accessible. They could provide a customised or personalised service, and more than anything they were cheap. Or at least they though they were. If history has taught us anything, its that total cost of ownership is more important than actual unit prices. Even if the product is being given away free.

IT businesses generally tend to appear in clusters. The north of England has many traditional IT support companies, most of the web design houses are in the north west. The midlands have the most IT training centres.  The south is home to web hosting and data centres, and London in general is home to everything. Of course, this is a generalisation, but you get the picture.

As the computer shops started to dot around the UK landscape, the bigger players finally started to take this market seriously and readied their onslaught. Dixons created its PC world store and PC world for business directory. eBuyer became the one of the top online mail order companies alongside Dabs and Insight.In the ISP arena, Dixons again, first to take note, introduced us to Freeserve, while BT created its BT openworld department.If you look at the state of play, now in 2007, you will see the smaller computer retail stores, either struggling or already gone bust. Most of the small ISPs have either disappeared or have been swallowed by the larger players. 

The attraction to value
You see what these bigger players were able to do in each market segment, is add value. Whether this was in the form of a huge stock portfolio, fast turnarounds, low prices at a single click, and individual product reviews, as in the case of eBuyer. Or low price internet access with a plethora of bundled features such as spam filtering , pop3 mailboxes, firewalls, and webspace, as in the case of the larger ISPs.The smaller providers just couldn’t compete, and consumers will always be loyal to offerings with greatest overall value.

Its not just about lowering the price.

In all of this, the message to take home is that, businesses are not attracted to technological improvements or new and funkier business models but to value based propositions.

The increase in web site development expenditure occurred only when businesses realised that their company website can be a major part of their marketing campaign.

The fast adoption of business broadband, occurred only when there was the realisation that we can no longer afford to do business off the internet.

The greatest increase in IT outsourcing within the SME sector will occur only when small business start to realise or feel that incorporating IT into their business strategy is going to be instrumental to their success. And those providers that will be there, ready and waiting with appropriate product and service packages will be ones to reap most benefit. 

Don’t forget to leave your comments on this article, and post suggestions for new topics.

Those looking for my technical articles can now find them here. I have decided to move them to our corporate website so this blog can remain a true opinion or subjective information column.

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The infamous first post